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Interaction between EU carbon trading and international institutions: synergies or disruptions?

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J. Wettestad
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This paper discusses various dimensions of the developing positive and negative interactions between the company focused EU emissions trading (ETS) and country focused global carbon trading and other relevant global institutions. Three main cases of interaction are analysed. The author considers the interaction between the Kyoto Protocol and the ETS as target. The opposite relationship is then examined. i.e. with the ETS as the source and the Kyoto Protocol institutions as targets. Attention is given to a different and quite recent type of interaction involving the ETS, namely interaction between the ETS and the International Civil Aviation Organization. The author argues that the Kyoto Protocol must be seen as a very important causal factor. The Protocol established a legally binding emissions reduction target for the EU, and the EU realised that it had no common policies in place which could deliver such reductions. The paper discusses how there seems to be a widely held view among analysts that the establishment of the ETS has led to significantly more interest in the development of Clean Development Mechanism projects than would otherwise have been the case. The author concludes that it can be useful to think through the possibilities for deliberate interaction management, but its potential should not be overestimated. Synergies or disruptions often seem to be mere reflections of deeper political agreements or disagreements.